Total guarantee exposure was R263 billion at the end of 2015\/16, “because several entities had not fully used their available guarantee facilities”, the report said.<\/p>\n
These guarantees remain a massive risk on the country’s books, as they rely on the companies that receive them to use the money to run a successful business – something which SOEs have proven time and time again to be incapable of.<\/p>\n
“Government maintains its policy stance that any intervention to support state-owned companies must be deficit neutral,” Treasury said.<\/p>\n
“Entities receiving support from government will be required to provide sound business plans, improve governance and address operational inefficiencies. ”<\/p>\n
However, as detailed below, each SOE runs its own risks – with some more likely than others to fail, costing the country billions.<\/p>\n
\n
Eskom – R170 billion<\/strong><\/p>\n The largest guarantee exposure \u2013 more than R170 billion \u2013 supports Eskom\u2019s capital investment programme.<\/p>\n An exposure of R200 billion relates to the Independent Power Providers (IPPs). According to Treasury, Eskom is obliged to purchase power from these independent producers over a 20-year period based on a power-purchase agreement approved by the National Energy Regulator of South Africa.<\/p>\n “Should Eskom be unable to do this, government must purchase the power on Eskom\u2019s behalf,” it said, hence the liability.<\/p>\n “The risk of default with the IPP guarantee is low as the regulator fully provides for IPP costs in the Eskom tariff determinations. These factors mitigate the risk arising from these guarantees. However, a deterioration in Eskom\u2019s financial position would increase the risk of both exposures,” it said.<\/p>\n Passenger Rail Agency of South Africa – R53 billion<\/strong><\/p>\n The fiscus has committed R53 billion to fund Prasa\u2019s purchase of new rolling stock and signalling equipment. The Auditor General and the Public Protector have found weak expenditure controls and contract management in this programme.<\/p>\n “This raises concern that Prasa will not be able to complete the programme on time and within budget. In addition, projected declines in Prasa\u2019s fare revenue and ridership numbers raise concerns about the company\u2019s sustainability,” Treasury said.<\/p>\n South African National Roads Agency Limited – R35 billion<\/strong><\/p>\n Fiscal exposure to Sanral debt stood at R35 billion as at 31 March 2016, Treasury said. The guarantee was put in place to support the expansion of the agency\u2019s toll roads portfolio.<\/p>\n However, despite introducing a 60% discount, the collection of e-toll funds has consistently missed its targets, forcing government to step in, and putting future infrastructure projects at risk.<\/p>\n “E-toll collections and auctions are still closely monitored against projected collection levels to ensure recovery. Over the medium term, national government and the Gauteng provincial government will supplement e-toll revenue,” Treasury said.<\/p>\n “More generally, if government does not proceed with tolling to fund major freeways, difficult trade-offs will need to be confronted to avoid a deterioration in the national road network.”<\/p>\n South African Airways – R19.1 billion<\/strong><\/p>\n Government has issued a R19.1 billion guarantee facility to SAA to ensure the company can continue to operate as a going concern\u00a0– however, the carrier continues to post losses.<\/p>\n “There is currently a R14.3 billion exposure against the facility. Without the guarantees, SAA is technically insolvent. A new, full-strength board has been appointed and tasked with returning the airline to financial sustainability,” Treasury said.<\/p>\n South African Post Office – R4.4 billion<\/strong><\/p>\n Currently, government has a R4.4 billion guarantee exposure to the South African Post Office.<\/p>\n “A new board and CEO were appointed, and the company has been able to raise funding to repay creditors, implement a turnaround plan and reach a settlement with labour to mitigate the possibility of strike action,” Treasury said.<\/p>\n Land Bank – R6.6 billion<\/strong><\/p>\n Government provided the Land Bank with a R6.6 billion guarantee in 2014\/15, of which R5.3 billion has been drawn down as at 31 March 2016.<\/p>\n The guarantee has helped the bank expand its lending by 10 per cent in 2015\/16, despite a weak operating environment, and chart a path to stabilisation.<\/p>\n “The relatively short maturities of the bank\u2019s funding liabilities are gradually becoming longer, relieving pressure on the institution\u2019s cash flows, but they do still pose moderate risk to the fiscus.<\/p>\n “The bank is conducting an internal review to improve operational efficiency and developmental effectiveness,” Treasury said.<\/p>\n The Road Accident Fund – R155 billion<\/strong><\/p>\n RAF liabilities at the end of March 2016 were revised up to R155 billion from the R132 billion reported in the 2016 Budget. These liabilities are projected to grow to R345 billion in 2019\/20.<\/p>\n “The RAF has been insolvent for over 30 years, despite having a dedicated revenue stream in place to settle claims. Government has not yet tabled legislation to create a new equitable and affordable benefit arrangement to replace the fund,” Treasury said.<\/p>\n “Various options exist to reduce the RAF contingent liability, including increases in the RAF fuel levy. The new replacement scheme will be structured to ensure sustainability.”<\/p>\n Gordhan gives \u2018magic number\u2019 needed to fund higher education<\/a><\/strong><\/p>\n Nuclear can\u2019t and won\u2019t bankrupt South Africa: Treasury<\/a><\/strong><\/p>\n![\"Eskom](\"http:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2014\/04\/Eskom-light-2.png\")
<\/a><\/p>\n
\n<\/a><\/p>\n
\n<\/a><\/p>\n
\n<\/a><\/p>\n
\n<\/a><\/p>\n
\n<\/a><\/p>\n
\n<\/a><\/p>\n
\nMore on the budget<\/h3>\n